On December 31, 2019, Larkspur Corporation signed a 6-year, non-cancelable lease for a machine. The terms of the lease called for Larkspur to make annual payments of $12,460 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 8 years and a $5,700 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Larkspur uses the straight-line method of depreciation for all of its plant assets. Larkspurs incremental borrowing rate is 9%, and the lessors implicit rate is unknown.

1.Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)

Present value of the lease payments

$enter the present value of the lease payments in dollars rounded to 0 decimal places

2.

a.To record the lease

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b. To record first lease payment

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c. To record amortization of right-of-use asset

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d. To record interest expense

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